Tesla Motors Inc (TSLA) Gives Investors A Reality Check, Shares Tank

Tesla Motors Inc (NASDAQ:TSLA) shares had overshot over the past few months, Barclays analyst Brian Johnson said in a research note to analysts. Though losses for the third quarter narrowed, the company projects lower than expected Model S deliveries during the fourth quarter. Johnson says the lower delivery forecast by Tesla Motors Inc (NASDAQ:TSLA) reinforces his view that the stock is valued more properly at $141 a share.

Tesla’s Q4 forecast misses estimate

The California-based automaker reported Tuesday that it incurred a loss of $38 million or 32 cents a share on revenues of $431 million on a GAAP basis. Analysts polled by Thomson Reuters expected a loss of 25 cents. Using the non-GAAP method, Tesla Motors Inc (NASDAQ:TSLA)’s adjusted earnings stood at $15.9 million or 12 cents compared to Barclays’ estimate of 17 cents a share. Adjusted revenue stood at $603 million for the quarter ending September 30. Johnson said results were not encouraging. Tesla Motors Inc. (NASDAQ:TSLA) had lost $111 million on revenues of $50 million in the corresponding period last year.

Tesla Motors Inc (NASDAQ:TSLA) delivered 5,500 Model S cars in Q3, including more than 1,000 in Europe. That was well below Barclays’ estimate of 5,850. The company forecasts 6,000 Model S deliveries in the current quarter, compared to Johnson’s expectation of 6,603. Excluding ZEV credits, gross margins came at 21%, beating Barclays’ forecast of 19.4%. Though the company had free cash flow of $26 million as of September 30, it expects FCF to be “about break even” in Q4.

Tesla is production-constrained

In a conference call with analysts, Tesla Motors Inc (NASDAQ:TSLA) founder Elon Musk said the company is facing production constraints despite strong demand. He said the company will boost R&D spending by 25% in Q4. The company plans to enhance its Model S and the upcoming Model X SUV. Tesla Motors Inc (NASDAQ:TSLA) is also increasing its network of stores, service centers and supercharging stations.

Tesla Motors Inc (NASDAQ:TSLA)’s third quarter results disappointed investors, sending shares down 12.34% to $155 in premarket trading. Barclays has a neutral rating on the stock with $141 price target.